Mortgage Note Buyers, I want to sell my note. Why does it matter what I sold the property for?

Question:
Which note would you rather buy and own -
A) A $50,000 note secured by a house that sold 3 years ago for $125,000.
B) A $50,000 note secured by a house that sold 3 years ago for 51,000.

Answer:
Equity. Equity. Equity.

Why does a real estate note buyer want to know what the property sold for?

It speaks to the equity or potential "equity cushion" that the payor has in the deal.

The more equity that the payor has in the deal, the less likely the payor will want to
default on the mortgage note.

For a note buyer, knowing the actual selling price paid for the real estate is an indication of the property value at the time of the real estate transaction. Certainly, the property may have fluctuated in value since the sale. But, it is a benchmark as to value at the time of the sale.

Real estate notes that have protective equity (the difference between the note balance and the selling price or current value of the property) are MUCH more valuable than notes that have little to no protective equity.

Again, selling price of the property is just 1 of 13 factors or variables that go into the pricing or determining the cash out value for your real estate note.